SK Hynix secures profit sustainability through long-term supply agreements (LTAs), locking in HBM chip capacity and pricing.

As SK Hynix secures profit sustainability through long-term supply agreements (LTAs), analysts believe the company's stock price should be reassessed accordingly.

In a report released on the 22nd, Hanwha Investment & Securities raised SK Hynix's target stock price from 1.63 million won to 4.3 million won. This figure is based on a price-to-earnings ratio (12MF) of 10 times, which represents the minimum multiple applied to global semiconductor stocks at least 12 months forward.

The rationale for the upward target price revision is that South Korea's memory chip industry has completely overcome the profit volatility problem, which has long been a chronic factor causing the industry to be severely undervalued. In the past, domestic memory chip companies frequently posted operating profit margins below 10% or losses during downturn cycles, resulting in valuation multiples substantially lower than their global counterparts.

Park Joon-young, a researcher at Hanwha Research Institute, stated: "The Korean memory industry is overcoming its weaknesses based on powerful weapons such as LTAs and high bandwidth memory (HBM)," and added: "Now, even during downturn periods, we expect to maintain at least a 30% operating profit margin."

SK Hynix has actively entered into LTAs that include legal clauses preventing memory chip price declines. Additionally, HBM, which accounts for approximately 20% of profits, maintains a stable price trend, supporting sustained profit growth. Researcher Park predicts that HBM will once again surpass commodity chip profitability next year.

Notably, analysis shows that SK Hynix's stock price is severely undervalued compared to global peers. Among global semiconductor stocks, none have a 12MF price-to-earnings ratio below 10 times, and Micron Technology, which is primarily focused on memory chips, also has a valuation multiple exceeding 10 times. By contrast, SK Hynix's 12MF P/E ratio stands at merely 6.6 times.

Researcher Park points out: "Although SK Hynix has the highest operating profit expectations among peers this year and next, and its technological advantages are far superior, SK Hynix is nonetheless groundlessly undervalued in the global technology sector."

The listing of American Depositary Receipts (ADRs) is cited as a key driver for future stock revaluation. Should the ADR listing be completed this year, it would enable direct comparison and valuation of similar companies in the U.S. stock market, providing an opportunity to recognize its overwhelming fundamental strengths and technological advantages.